A court of appeal case published on August 31, Great West Contractors, Inc. v. Irvine Unified School District, refined the rules for public agencies evaluating bids submitted for a low-bid contract by clarifying the distinction between bidder responsiveness and bidder responsibility. In short, bidder responsiveness can only be determined on the face of the bid, and the rejection of a bid based on information obtained from an investigation external to the bid must be evaluated as an issue of bidder responsibility. The court also made several observations about the apparent favoritism of the School District in attempting to award the contract to the third low bidder. Please read on for a discussion of the case.
In Great West Contractors, the Irvine Unified School District advertised contracts for the modernization of two elementary schools. Great West Contractors was the low bidder on both projects by a combined total of approximately $800,000. In response to a question included in the bid package asking bidders whether they had ever been licensed under a different name or license number, Great West answered "no." This was the same answer Great West had given during the pre-qualification process, which the School District had found acceptable. However, after investigating the licenses previously held by Great West, the School District discovered that it had previously operated under several other licenses which were not directly relevant to the work to be performed on the modernization projects. Nonetheless, the School District decided to reject Great West’s bid as non-responsive.
Great West protested the rejection of their bid, lost at the trial level and appealed the case. The appellate court, citing the recent D.H. Williams v. Clovis Unified Unified School District (2007) 146 146 Cal.App.4th 757 case, held that:
a public agency cannot reject the bid of the lowest bidder on a public works project on the theory that the bid is "nonresponsive" to the agency’s request for bids when, in substance, the real reason for the rejection is that the agency thinks the lowest bidder is "not responsible"–at least not without giving the lowest bidder the chance for a hearing on whether the lowest bidder really is "nonresponsible."
More specifically, the court held that bidder responsiveness can only be determined from the face of the bid. Once an agency investigates information outside of the bid, as the School District did by investigating Great West’s prior licenses, it becomes an issue of bidder responsibility and the rejection of the bid requires providing the bidder a due process hearing. The court also restated the 5 factors considered by the D.H. Williams case for determining when an issue is really one of bidder responsibility, not responsiveness (which I won’t detail here). Ultimately, the court reversed the judgment of the trial court and remanded the matter to allow Great West to amend its complaint to pursue its bid preparation costs and presumably for a due process "responsibility" hearing.
The lesson for public agencies is clear: don’t reject a bidder as nonresponsive based on information which does not appear on the face of the bid. While it is obviously beneficial for public agencies to couch a bid rejection as an issue of non-responsive as opposed to nonresponsibility, after the Great West case a court can apply its own judgment to convert the issue to one of bidder responsibility which entitles the bidder to a hearing and a more difficult standard for rejection. If the issue facing the agency is truly one of bidder responsibility, a public agency should treat it as such or risk facing a successful protest.
Also of note, the court used disdainful language in observing the apparent favoritism displayed by the School District in trying to award the contract to Great West as evidenced by: 1) rejecting Great West’s bid for holding ancillary licenses while ignoring the same issue with the third low bidder awarded the contract; and 2) the failure of the School District to respond to Great West’s Public Records Act request until almost a month after the request was submitted, while responding within a day of a request submitted by another bidder.